We have come up with a series of research insights and perspectives on different asset class and in that context, we cover up the Treasury part and highlighting a small part of the global equities. Where the markets are heading and what business and traders are planning for the CY-2021? Will equity markets scale up to new highs or the debt market and treasury papers will be back into the game? Will the ammunition of stimulus under the tag line of “Unprecedented Time” will be continued? Before we get into equities we need to understand little about the treasury industry of the corporate. The world stands to be divided where the treasury market will need complete change over in management where corporate would need real-time reporting capabilities to achieve a real-time view of their financial position. Even at the government level, treasury management is now going to be a critical activity.
As Bond yields holding near 1.6%, dollar firmer and stocks lower have become a major concern for global investors. It's high time to understand and take a new approach towards the Treasury lifecycle after this pandemic. Covid waves (maybe 2nd, 3rd wave based on countries) are gripping back on the earth. This wave will impact the treasuries of corporate as they face the fear of relapse of the pandemic which further raises the fear of starting up a business or planning any investments. Corporate has to focus on managing their cycle of receivables and cash conversions followed with greater transparency. If they don’t adopt the same then many corporate will face a significant crisis of downgrading. The reason for having a key focus on corporate treasury management and real-time reporting since we don’t know how much business across any sector or size has completed wiped out from the global map. Further, those companies which managed to survive 1st wave of covid may not be able to sustain 2nd or 3rd wave.
The surprise Covid waves attack always creates brakes on business planning. We know that vaccination and its process have slowed and further it’s a time-consuming affair. This is a natural process hence the risk for the world economy is not over yet. For example, if we take the situation of India we find that the first wave peaked in the third week of September (daily cases at ~92,000), with cases declining to a low of ~11,000 in mid-February. Over the past one month, daily cases have risen to ~25,000 per day.
This data reflects a small story about the covid waves and how it’s going to impact business, trade and finance planning. This reflects that corporate business planning will take a wait and watch mode and treasuries will face the biggest problem. Liquidity management under these times will pave the way for corporate treasury management.
The immediate question which comes to mind is that will the world will witness another few trillions of inflow in 2021?. Well, we will see more stimulus money coming in 2021 as long the vaccination is not properly done to the ratio of 50% to 60%. The reason being that new variants of the Covid are also in the play and we will witness new covid vaccines of higher strength will be coming to face these new variants. But these are time-consuming and hence we will see more liquidity coming into the market. Further, as the corporate situation is under stress and treasuries are further into uncertainty we will witness more inflows to support the corporate and its citizens across the globe.
The market is already witnessing the impact of inflation due to rising commodity prices and crude prices. Well both of them manipulative and loss recovery segment (pandemic loss). The gulf countries are keener to manage their economy riding on higher crude prices whereas commodity is facing partial unlocking of mines and significant demand from china wish is pushing the prices. The inflation will continue its impact as locking and unlocking will continue the same will be volatile and it will ride accordingly on the different asset class.
We know that in the U.S economy the Fed's balance sheet continued to expand. Total assets rose by $26.1 to a fresh all-time high of $7.72tn with respect to holdings of US Treasury securities up to $9.67bn to $4.92tn as of March 24 from the prior week. Recently its being found that PM Mario Draghi needs a new stimulus program within weeks to bankroll higher monthly lockdown costs of as much as €15bn. We will see more liquidity coming up until the covid vaccination gets control on the covid. In the next part, we will cover the equity outlook.
Posts
